The Jeopardy of Watson: How I Would Improve IBM’s Business Performance

Saturday, January 11th, 2014

Been retired 11 days now. Feels good even though I’m still adjusting to the verb and the adjective. The reaction of others is “lucky you”; my reaction is “am I as old as my father once seemed?! I am working on the straight-faced retort, “Yeah, I retired. How much money does a guy need?!”

The sobering reality is that at a meeting with the staff of a prospective client yesterday (it turns out that I need some more money), I asked about the profile of their typical customer. One replied, “Old. Like in their thirties.” I hoped that she referred to their geographic latitude or their winter weather. Nope. Age. I was calm and continued taking notes on my Underwood.

This is not a rant of a guy on the other side of the company gate. Truthfully, I already appreciate IBM’s employee shield as I purposefully explore the US’s systems of healthcare, retirement and university education. Or Not! Our family’s healthcare cost could triple for less coverage; how long will we live for how much?!; is even public university price-worthy for the requirements of the modern, Internet world? Such deliberations reaffirm the need for cocktail hour.

Yes, posterity will record that I retired from IBM. And it feels much better to separate with a handshake than a cardboard box. The subtext of my exit is that employees of a certain age were told that we’re expensive; employed in the lowest revenue and weakest growth marketplace, North America; and would not be laid-off if we agreed to retire after an eighteen month period of reduced hours. I imagined a composite wanted-poster of us being nailed to telephone poles and pasted above coffee machines: “Have you seen these around? Encourage them to leave.” So I did.

As I worked from my home office for 15 years and met many more clients than I did other IBMers (the nature of my job was international travel to discuss technology strategies with senior executives of our clients), not much has changed for me so far. I do read IBM tweets and press with the attitude of an outsider. It’s the same way that I perceive news about the US Navy. I believe that I understand the language and the culture; I have no pretense that I am up to date on the details of decision-making.

Like you, I read this week that IBM will invest $1 billion dollars in its Watson Division. After three years of much promising without much related selling, the proffered solution is more investment. The logic seems to be “if we invest more, they will buy more.” I don’t buy this thinking for several reasons. Customers with whom I’ve spoken about Watson or Cognitive Computing do not relate to the feat of winning at Jeopardy. It’s an American tv program. International executives know it’s a game show and most don’t understand the game. The brains behind Watson’s development, Dr. Dave Ferruci, left IBM quietly over one year ago (he joined a hedge fund). This is not a positive sign for a fledgling technology.

think-place

The secret sauce of Watson is the quality of its own data, the data that it uses to learn about a topic so that it can assess and understand what other target data sets might mean. It has to be taught all of the cities in the world to understand a question related to the location of Toronto. Few, very few clients have such high quality data sets. If they do, they guard this data carefully. Watson systems are expensive. Combining these two circumstances portrays why hospitals and banks are the first clients of Watson and why neither is making a related, profitable business for IBM. Hospitals may be willing to share some form of patient data and, in no way, can they afford the price of a Watson computing system. So they want to share a Watson system. IBM is trying this approach now with a Watson Cloud offering (details TBD). Banks can afford Watson computing systems and, in no way, have the correct data to teach Watson (what does your bank really know about you?!).

Now that the IBM’s Smarter Planet mantra is shopworn, there is a struggle to promote the next technology rallying point. Watson is the only wild card in their hand. This plus way too many unconnected acquisitions. Watson feels like another OS2 effort. By the time that it’s great, Siri, Dragon, Nuance and others will offer mid-range and personal equivalents.

What was the road not taken by IBM? The product climate of IBM reminds me of a too similar circumstance in the mid-1980s when I was an IBM client in Maine. Our young Boston-educated IT staff wanted to delve into mid-range computers and packaged software. The reliable and equally skilled IBM account team hardly knew what they were talking about. The company’s management sided with IBM and the boys returned to Boston to work for DEC. Then came the wave of personal computers, a storm that IBM weathered well. Unfortunately, the company considered PCs to be hardware products and allowed the Seattle startup, Microsoft, to develop and to own the operating system software. Hell hath no fury…and IBM began the OS2 march to Moscow. That did it and nearly did in the company. IBM has never again attempted packaged or end-user software development. I guess that the accuracy of my comment depends upon how one feels about Lotus Notes and recent acquisitions.

Frozen on the wrong MIS road, IBM fell to one knee in the early 1990s. Burroughs nearly purchased IBM. Outsiders Lou Gerstner from American Express and Jerry York from Chrysler were deputized to rescue the company from itself. The marketplace cooperated thanks to the ERP period, the Y2K scare and the e-business boom (bomb). They righted the boat, were thanked and dismissed. A veteran of the money-bleeding PC division replaced Lou as CEO.

Then began the march to the past. As the Internet-based technologies replaced dozens of markets and millions of users with millions of markets and dozens of users, IBM management pined for the days of the branch office (Lou closed them all to incite employees to go see clients) and the predictable profits streams of mainframe-based computing. This strategy exploded, ignited by the Financial Crisis of 2008 (banks are by far IBM’s best customers). Apple and the iPhone took center stage. Senior executives of IBM clients traded their Blackberrys for the phones that their kids were using. Promising a steady increase in earnings per share and tacitly admitted that they could no longer compete via internal resources, IBM went on an acquisition binge. To pay for dozens and dozens of acquisitions, a companion program of maniacal cost-cutting was implemented.

The world of Mobile, Social, Cloud and Big Data is being taken on by a machine called Watson. Ironically, the voice recognition algorithms used by Watson are licensed from Nuance, the same company that licensed Siri to Apple. Nuance got this speech recognition software from IBM (Via Voice) at fire-sale pricing from IBM Research as these Labs were pressured to earn their keep. It would be hard to make this up.

What would I do if I were CEO for a day? I’d adopt the tools that I try to sell to others. The company has no widespread and reliable customer management system; sales are managed on Excel spreadsheets; employee productivity tools are nearly the same as they were 15 years ago: Lotus Notes, Lotus Instant Messaging and a company portal. Conference calls and emails predominate the distribution of information in a cascading model. There is nearly no way to talk back or up or over. Never in 15 years of speaking with the most senior executives of IBM’s biggest clients did I ever have access to a CRM system. No one ever knew what I learned.

Meanwhile, Apple earns as much in a quarter as IBM promises to earn in its much heralded 2015 Roadmap. I’d appoint executives who talk to their employees in a modern, meaningful way. Lou was good at this; Sam didn’t try; Ginni was handed the job because Moffet went to jail. The strength of the company is its incredibly talented, and sadly underutilized, employees.

There may always be an IBM as there may always be the local utility company. Success in the urgent near term requires widespread revitalization of the company’s morale and a determined focus on competing where it matters to clients. Watson knows this.

Blue Pane Studio’s 2nd Android app: Environmental Biology 2011 Conference

Tuesday, April 5th, 2011

Learning that Android apps require much more production work than do apps for Apple devices, mainly because there are several versions of Android devices, i.e. 2.1, 2.2, and each view on an Android device requires a little modification to the lay-out. There is a rich supply of related articles, rants, pleas for a common development platform or solution to this matter as clients cannot be aware of the increased complexity compared to design for an Apple device. At first, BPS calculated that it will build for Apple devices and work on the Android version as the Apple build worked its way thru the associated 10 day approval process. The thinking was that converting from Apple to Android would be about 50% of the effort. Not so fast! Ultimately, Android design costs more and has to be priced accordingly in the future. The hidden victims of this complexity are the other device manufacturers such as RIM and Nokia-Microsoft. Until their market share increases, design studios will discourage clients from deploying apps on such devices due to the poor return on investment in design effort. We are all learning this new game.

Computer Tabulating Recording Corporation celebrates 100

Friday, February 4th, 2011

IBM, nee a merger of the Computer Scale Company of America and the International Time Recording Company with the Tabulating Machine Company, started with weighing devices and propelled into the realm of computer science by Herman Hollerith’s (not a man of blue suits and white shirts, for sure) tabulating machine and the US Census Bureau (behind every successful company stands a good government project).

As Casey Stengel once said of pitcher and Durham native, Roger Craig, who completed 27 games amidst a record of 15 wins and 46 loses in two seasons with the beloved and famously inept New York Mets of the early 1960s, “ya gotta be pretty good to lose that many games.”

Maybe the same could be said of this company that can be such a large and benign target – I think of Arthur C. Clarke’s HAL 9000- add a letter to HAL, i.e. H + 1 letter = I. Although, I observe that Microsoft years ago became the outfit that everyone loved to hate.

We have to admire CTCR/IBM’s sturdy capacity to survive amidst the torrent of technology changes and sometimes immobile management. As well, we should be thankful for what IBM achieved for our country and the world. You can look it up – above.

The Economist 2010 Award for Innovation: be like Steve

Monday, October 11th, 2010

economist innovation

Economist citation here. What can be the results of such innovation? Microsoft announces new mobile phone platform today and stock goes nearly nowhere, remaining around $24.62. Today, Apple stock rises $2.83 to $296.91 achieving new, all-time high. Imitation is indeed a high, and seemingly profitable, form of flattery.

Where is the mobile phone app race presently?
Daily Downloads in millions:
Apple – 20
Android – 5
Nokia – 2.3
RIM- 1.5

Mobile Device Operating Systems, market share in %
Symbian (Nokia) – 40
Blackberry (RIM) – 18
Android- 16
Apple – 15
Microsoft – 7
Others- 4

Apple has 15% market share and greater than 2x the number of apps sold as all of their competitors combined!

As other firms cut costs, buy back stock and hoard cash, Apple pursues its own path of innovation. Their stock is up nearly $60 since the iPad’s introduction in April of this year. Seems to me that the mantra of the enterprise should be “how might we be like Apple?”

‘With access to the same people, the same technologies and the same funding sources, why are they consistently so innovative?’ might be a question that every CEO would strive to answer in our economic doldrums.

Steve Jobs The Econ

The Orcs approach

Saturday, January 24th, 2009

Four people that I’ve worked within the past 3 months were laid-off this week. All senior employees; two quite competent employees. And large organizations have to act swiftly and cut in large swaths. No time for careful, 1×1 analysis.

For the first time Microsoft announced lay-offs, a target of 5,000. At a cost of $200,000 per year per employee this number will reduce Microsoft’s payroll by $1,000,0000,000. Imagine how they could invest that sum in our globalized, Internet-touchable world. If one is high cost, one had better be highly productive and in an obviously measurable way.

Microsoft & Yahoo, Giants & New England, Obama & McCain

Monday, February 4th, 2008

Tomorrow is Mardi Gras in my hometown of New Orleans.  On this day convention defers to imagination.  And plenty of conventional wisdom has stepped aside already this year: in sports, the seemingly unstoppable mastery of Roger Federer and that of the Patriots ended in startling fashion; in the presidential campaign, Obama seems to have surged into a dead-heat with Hillary; and John McCain, counted-out in October, is now the odds-on favorite for his party’s nomination.

So what is the wisdom of Microsoft’s bid for Yahoo and how might we benefit from this gamble as they try to prevent Google from doing to them what they did to AOL (America on Line).

– AOL’s model was to capture the customer in the AOL-only experience.  No need to ever leave the world of AOL, whether you wanted to or not.  Monthly fee revenue model.

– Yahoo trumped this model by providing a portal where Yahoo aggregated content developed by others around the Internet.  ‘No need to leave, we’ll bring it to you.’  Banner ad & pop-up revenue model.

– Google trumped Yahoo by using their search engine to take visitors all over the Internet where Google would keep track of their searches and visits to deliver related advertising.  Advertisers, not visitors, pay Google.

Let’s imagine what this merger might imply for our organizations aside from the reminder of the recent, sour history of such mega-merger attempts: e.g. HP & Compaq, AOL & Time Warner, Chrysler & Daimler.

The Internet’s emerging technologies and uses are evolving rapidly to being about:

Innovation not Integration by connecting like-minded people regardless of location or employer.  This is a design point for our systems and services.

Information not Application by connecting those who need to know with the content that they require.

Mobility and Advertising on the mobile device.  Remember AOL and its garden wall approach?  This is what the iPhone is doing to the garden walls of the Telecom companies.  Google, Yahoo, and Microsoft spent $10b here in 2007.

As Tuesday’s Rex parade circles Canal Street, the costumed crowd will shout the conventional “throw me something, mister!” Let’s imagine what other opportunities are in store for them.

Laissez les bon temps rouler!  Christopher Perrien

Sub-prime making news; Video and Mobility making progress

Wednesday, December 5th, 2007

- Please don’t ask about the extent of the aftershock of foolish borrowing and careless lending.  On so many fronts in our globalized marketplace, at both the individual and enterprise level, we’re probably going to have to heed the advice of Tancredi in The Leopard:  “If you want things to stay as they are, things will have to change.”

Meanwhile, other engines maintain their hum and will move closer to the center stage of widespread technical adoption in 2008.  Two examples that I track are video as a story-telling device and the elevation of the 3rd screen to our 1st screen.

– Last Christmas season my high school son and two of his classmates won a contest at the local upscale mall by producing a sixty second video to promote the shopping season.  They won $400 in equipment for the school and $600 to split three ways.  The recently concluded 2007 contest enjoyed a threefold increase in participation and a tenfold increase in prize money: $6,000 in equipment and $4,000 to split.  Clearly, the mall, the merchants and the aspiring film-makers see solid business value in consumer generated, good-enough, easy to deploy video to tell their stories. 

– So much is happening on the mobility front that it may not be obvious, although GPS features and related acquisitions (Navteq by Nokia and Tele Atlas by Tom Tom) are getting plenty of press.  With the $10b that Yahoo, Microsoft, and Google spent in 2007 to acquire search and advertising related companies and the popular reception to Apple’s iPhone, we will soon have the sort of mobile computing capabilities that consumers in other parts of the world have enjoyed for several years.  

The driving force behind all of this activity is control of search on the mobile device.  The revenue model is that Location Awareness facilitates Search and Search enables targeted Advertising.  Curious is our notion that the 1st screen is the TV and the 2nd screen is the PC, yet we all carry a 3rd screen nearly everywhere we go.  “Can you hear me now?” will rapidly migrate to “We know where you are and can help you to find and to pay for what you want. Just text me.”

cp

All Souls Day – Social Networking of the 11th Century

Thursday, November 1st, 2007

I grew up in New Orleans where parochial school children enjoyed two entertaining annual holidays:

– the well advertised Mardi Gras, a Tuesday day-off in mid Winter

– the Wednesday after Halloween to celebrate All Saints or All Souls Day

The headlines are occupied by the rise of oil, the fall of the dollar, the kick-off to the presidential race (so far it’s been preseason) and the finale to the sub-prime collapse.  Amidst the dour mainstream news, consider the escalation of the Microsoft vs Google campaign which should influence our own 2008 planning: 

- Microsoft invested $240mm investment in Facebook (1.6% stake) last week and Google countered immediately with an open standards alliance, Open Social, including LinkedIn, Ning, and Orkut (Google’s own social network).  Google does not want Facebook to become the operating system of social networks.  Quick aside: News Corp.’s 2006 100% acquisition of MySpace for $580mm looks brilliant.

Are we blindly returning to Act II of the dot-bom?  I think not and I believe that Social Networking or Community Building as promoted by Facebook and others could be adopted by our own kinds of enterprises to better connect our widely dispersed knowledge bases: employees, customers, partners, supplier in the spirit of ‘What if we knew what we all knew?!’

Right now I have eleven (11) applications opened to manage my work inside and outside of the firewall: email, sms, two types of instant messaging, two browsers, plus the associated tools for calendar, address book, word processing and a mobile phone.  I would value a workspace where I could link all of my activities to ‘connect those who know with those who need to know, regardless of their employer.  I see a Facebook-like model helping me to achieve this.

Eric Schmidt, CEO of Google, is quoted in Monday’s NY Times:  “One of the things to say, very clearly, is that social networks are very real.  If you are of a certain age, you sort of dismiss this as college kids or teenagers.  But this is very real.”  Google closed over $700 today, up 54% YTD.

‘Start small, grow fast, get involved‘ might be a productive way to explore the potential of Social Networking or Innovation Networking in 2008.   No holiday required.

Perrien